Congressional Democrats: Stimulus loan not for company employing Louisiana oil workers

Congressional Democrats want a publicly traded offshore oil service company to return a $10 million federal small business loan that helped boost profits and keep south Louisiana workers employed.

Gulf Island Fabrication, a Houston-based company that is one of Houma's largest employers, reported in earnings filings this week that it obtained the maximum $10 million from the federal Paycheck Protection Program, a stimulus effort designed to buoy small businesses crippled by shut downs during the coronavirus.

Democratic members of a House committee overseeing federal spending during the coronavirus pandemic sent letters Friday to Gulf Island Fabrication and four other publicly traded companies demanding they immediately return the millions of dollars in taxpayer-funded loans they received through the stimulus loan program.

More:Oil service company with Houma office profits with help from $10 million stimulus loan

“Since your company is a public entity with a substantial investor base and access to capital markets, we ask that you return these funds immediately,” the letter to Gulf Island CEO Richard Heo says. “Returning these funds will allow truly small businesses — which do not have access to alternative sources of capital — to obtain the emergency loans they need to avoid layoffs, stay in business, and weather the economic disruption caused by the coronavirus crisis.”

Congress approved $659 billion for the program in two separate aid packages aimed at helping the country weather the coronavirus pandemic. The money can be repaid at 1% interest over two years. The federal government will forgive all or part of the loan if it is used to cover payroll and other specified costs required to keep the business operating amid the pandemic.

The first round of money ran out in 13 days, sparking complaints from small businesses, members of Congress and others who contend larger publicly traded companies crowded out the smaller ones for which the loans were intended.

The call by Democrats for Gulf Island and the other companies to return the federal loan money drew swift criticism from Republican U.S. Rep. Steve Scalise of Metairie, the ranking Republican on the House Select Subcommittee on the Coronavirus Crisis, whose congressional district includes southern Terrebonne and Lafourche parishes.

“It is outrageous and telling that the first action committee Democrats have taken is blindly sending harassing letters to individual companies that followed the law to keep their workers on the payroll — a law that each of their members on the committee voted for — rather than using their power to work with together on a bipartisan basis to help families safely get back to work and start holding China accountable for the devastation they perpetrated on the American people,” Scalise, the House majority whip, said in a written statement.

Scalise noted that U.S. Treasury Secretary Steven Mnuchin has already stated that his department is looking into all companies that have received loans through the PPP program.

On Tuesday, the Treasury Department asked publicly traded companies to return the loan money by May 14 under the threat of penalties. Some companies have challenged that, contending the initial rules made them eligible for the loans.

“With a large-scale audit underway, this action by Democrats represents dangerous government intimidation that could cause more widespread layoffs at a time when we should be trying to keep American workers on the payroll,” Scalise said. “We hope Democrats will change course and spend as much time targeting, shaming, and investigating China as they do going after American workers and job creators.”

Gulf Island discussed the loan in a conference call Wednesday with investors as part of its first-quarter earnings report. Heo also discussed the loan in a news release on the earnings report.

Gulf Island, which builds ships, oilfield platforms and other industrial structures, employed 944 people as of Dec. 31, according to an annual report filed with the U.S. Securities and Exchange Commission. Most of the employees work at the company’s Houma shipyard and fabrication facilities, making Gulf Island one of Houma-Thibodaux’s largest employers.

More:Amid coronavirus, Louisiana oil and gas workforce sees 23% layoffs, wells shut, fear more

More:Louisiana's oil and gas industry needs 'life-support' relief after COVID-19 crisis

The company on Wednesday reported a net income of $5.9 million for the first three months of the year. The performance was buoyed by a one-time injection of $10 million from the settlement of a contract dispute for a previously completed project and cuts to executive pay amid the downturn, the company reported.

“The impact of COVID-19 on the global economy and our industry as well as the related decline in oil prices has created significant uncertainty for our business and operations,” Heo said in the release.

“In this challenging and uncertain time, the PPP Loan proceeds provide necessary liquidity to defray payroll and benefit costs, including maximizing our ability to retain our workforce, execute our current backlog and compete for new project awards,” Heo said. “We have already used a portion of the borrowed funds to return a number of employees we had furloughed at the onset of the pandemic and we have retained additional employees we would have had to furlough or terminate without such funds.”

Gulf Island secured its loan from Hancock Whitney Bank on April 17, before the SBA issued the guidance, an SEC filing shows. Six days later, the U.S. Small Business Administration, which is administering the PPP loans, issued guidance aimed at restricting publicly traded companies from receiving the loan money.

Democrats on the oversight committee note that each of the five companies they are seeking repayment from have market caps, total stock values, of $25 million or more. Each also has at least $6 million and received the maximum $10 million loan through the program.

At the end of trading Friday, Gulf Island’s market capitalization was more than $46 million.

The CARES Act, Congress’ first stimulus package, required the money go to businesses with 500 or fewer people at any single location. But the law includes exemptions for several industry categories, including oil and gas, allowing them to have as many as 1,000 workers at a single site.

In their letters, the Democrats ask Gulf Island and the other companies to indicate by Monday whether they plan to return the money. If not, the lawmakers said they will request a slate of loan documents from the companies by Friday.

The other companies are EVO Transportation & Energy Services, the MiMedx Group, Quantum Corp and Universal Stainless & Alloy Products.

The letters were signed by committee Chairman U.S. Rep. James Clyburn of South Carolina, and U.S. Reps. Maxine Waters of California, Carolyn Maloney and Nydia M. Velázquez of New York, Bill Foster of Illinois, Jamie Raskin of Maryland and Andy Kim of New Jersey.

Keith Magill can be reached at 857-2201 or keith.magill@houmatoday.com.